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The company, formerly known as Facebook, is already warning investors not to expect much real revenue from its metaverse project in the near future, even though the entire entity was rebranded as Meta (FB) less than nine years ago. In Meta’s latest quarterly earnings call, CEO Mark Zuckerberg suggested it could take about seven to 10 years for the company’s investments in building immersive virtual worlds to return net income. This slowdown is the functional equivalent of “never” for many serious investors.
The long roadmap is a reminder that while Facebook touted its pivot to Meta as a serious long-term plan, that wasn’t the whole truth. In retrospect, Meta’s pivot was at least as much like a panicked, half-armed stampede to distract from a storm of public criticism of Facebook’s social effects. Meta’s almost casual posts about the revenue expectations of its namesake’s new concept are in stark contrast to blockchain-based metaverses like Decentraland, which seem to care about success like nothing else.
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On Facebook/Meta, however, Wednesday’s call made it clear that the Metaverse is little more than a PR tool.
The most notable moment came when Zuckerberg was asked to provide a timeline of real-life returns from the company’s Reality Labs segment, home of virtual reality (VR) hardware maker Oculus and virtual space Horizon Worlds.
“I expect it to be later this decade,” Zuckerberg said of Metaverse’s adoption timeline. “…This lays the foundation for a very successful 2030, when it will continue to be established as the primary computing platform.”
That is absolutely nonsensical for the CEO of a major company to say about their alleged tent project. I have a friend who manages money for a large pension fund, and he once told me something very basic and obvious, but crucial: serious institutional investors don’t bet more than five years into the future, and usually no more than two. The big banks and big funds on Wall Street have seen it all, and they’ve learned that you can’t predict the future after a certain point. They care about what your income looks like in six months or a year, not ten years.
Of course, angel investors and venture capitalists love to take small, multi-year long-term bets, and big companies like Google’s parent company Alphabet (GOOG) have R&D departments that are developing unprofitably but forward-looking. But Google has never rebranded itself as ‘Project Loon’, because the banks and other giants that trade in much larger numbers want far more security than a longshot of R&D can provide. So when Zuckerberg says, “It’ll be 10 years,” serious investors hear, “It’s a complete guess and maybe not real at all and we had no substantial reason to rebrand around that. Ignore it.
Also see: Facebook steals another crypto idea † Opinion
Zuckerberg appeared later in the call to again temper the metaverse expectations in response to a similar question: “I think the cycle here between investment and revenue growth is significant enough to be close to or very profitable.” [for metaverse projects] it will be long. I think for Reality Labs it will take longer than most of the traditional software we’ve built.
Instead, COO Sheryl Sandberg was exploring details of new and upcoming advertising products… Well, they mostly talked about Instagram and Reels, two good products but hardly a game-changer at this stage.
Meta is ultimately an ad-dependent media company, and nothing more. The focus on Sandberg’s dusty ad pitch clearly demonstrated a genuine desire to build investor confidence in truly existing products in the face of emerging challenges in ad sales, changes in iOS data sharing and the loss of users from Russia.
There were other subtler hints of internal ambivalence towards the Metaverse and Reality Labs projects. There was a lot of talk about the call about slowing spending, a sensible response to uneven sales, and user growth for Meta’s real products. Zuckerberg specifically noted that “we now plan to slow the pace of some of our investments” — that is, internal spending on long-term projects — in a group of projects including Reality Labs.
But when an AB Bernstein analyst later asked about investment levels in metaverse projects in particular, Zuckerberg seemed to be dodging the question. “We’re moving most of the energy within the company to those high-priority areas, away from other areas,” Zuckerberg said, without specifying whether the metaverse is high-priority. Based on the call’s focus on Instagram ad monetization, it certainly doesn’t look like it.
Reality Labs spending rose 55% to $3.7 billion in the first quarter, signaling real commitment, but Zuckerberg’s talk about austerity was phrased in forward-looking terms, which isn’t necessarily the case. Some clearer Q1 data should be available in regulation soon, but what executives say in a public call deserves at least as much attention as the actual numbers. It’s a safe bet that Meta’s communications team is larger than the entire CoinDesk staff, and they certainly put an incredible amount of effort into massaging that message — but sometimes it just makes it easier to spot the sculptor’s hand.
And here’s the real headache: If the Metaverse is such a long-term project that the CEO and founder of Meta is downplaying his prospects in a profit call, then why has there been such a media storm around corporate brand change and the great new metaverse quest? in the first place?
Also see: Web 3 and the metaverse are not the same † Opinion
You shouldn’t remember this, but pivot Meta immediately followed a flurry of negative press for Facebook in early and mid 2021. In fact, Facebook announced its name change to Meta just weeks after former Facebook data scientist Frances Haugen broke ranks to reveal that the company, among other disturbing practices, had ignored its own investigation into how its products harm children.
Rather than continue this storm, Facebook has announced that it is now a “metaverse business”. Hurrah! It served a dual purpose, with a certain subset of investors enamored with the major novelty and critics like me having fun tearing it to shreds.
It is clear from Wednesday’s call that the diversion worked. There was no question about content moderation on Meta platforms. It’s a huge win, especially since there’s little evidence that the company has actually solved the problem. It doesn’t matter if Horizon Worlds ever goes viral, or if the metaverse behind Meta ever comes to fruition – for old Facebook it could be worth a few billion dollars to switch channels.